1 Role Of Accounting In Society 2 Introduction To Financial Statements 3 Analyzing And Recording Transactions 4 The Adjustment Process 5 Completing The Accounting Cycle 6 Merchandising Transactions 7 Accounting Information Systems 8 Fraud, Internal Controls, And Cash 9 Accounting For Receivables 10 Inventory 11 Long-term Assets 12 Current Liabilities 13 Long-term Liabilities 14 Corporation Accounting 15 Partnership Accounting 16 Statement Of Cash Flows Chapter11: Long-term Assets
Chapter Questions Section: Chapter Questions
Problem 1MC: Property, Plant, and Equipment is considered why type of asset? A. current assets B. contra assets... Problem 2MC: Which of the following would not be considered an intangible asset? A. goodwill B. patent C.... Problem 3MC: The legal protection that provides a company exclusive rights to produce and sell a unique product... Problem 4MC: Which of the following statements about capitalizing costs is correct? A. Capitalizing costs refers... Problem 5MC: Ngo Company purchased a truck for $54,000. Sales tax amounted to $5,400; shipping costs amounted to... Problem 6MC: If a company capitalizes costs that should be expensed, how is its income statement for the current... Problem 7MC: Depreciation of a plant asset is the process of ________. A. asset valuation for statement of... Problem 8MC: An accelerated depreciation method that takes more expense in the first few years of the assets life... Problem 9MC: The estimated economic life of an asset is also known as ________. A. residual value B. book value... Problem 10MC: The amortization process is like what other process? A. depreciation B. valuation C. recognizing... Problem 11MC: How are intangible assets with an indefinite life treated? A. They are depreciated. B. They are... Problem 12MC: If the market value of goodwill is found to be lower than the book value, goodwill is __________ and... Problem 13MC: Which of the following represents an event that is less routine when accounting for long-term... Problem 14MC: Which of the following is true regarding special issues in accounting for long-term assets? A. An... Problem 15MC: The loss in value from all causes within a property except those due to physical deterioration is... Problem 1Q: What is the difference between tangible and intangible assets? Problem 2Q: Define intangible assets. Problem 3Q: What is the difference between a patent and a copyright? Problem 4Q: What is goodwill, and how is it generated? Problem 5Q: For each of the following transactions, state whether the cost would be capitalized (C) or recorded... Problem 6Q: What amounts should be recorded as a cost of a long-term asset? Problem 7Q: Describe the relationship between expense recognition and long-term assets. Problem 8Q: Define natural resources. Problem 9Q: Explain the difference between depreciation, depletion, and amortization. Problem 10Q: Explain the differences between the process of amortizing intangible assets and the process of... Problem 11Q: What is goodwill, and what are the unique aspects of accounting for it? Problem 12Q: What are some examples of special issues in accounting for long-term assets? How are they handled? Problem 13Q: What is the difference between functional obsolescence and physical obsolescence? Problem 1EA: Fombell, Incorporated has the following assets in its trial balance: What is the total balance of... Problem 2EA: Jada Company had the following transactions during the year: Purchased a machine for $500,000 using... Problem 3EA: Montello Inc. purchases a delivery truck for $15,000. The truck has a salvage value of $3,000 and is... Problem 4EA: Montello Inc. purchases a delivery truck for $15,000. The truck has a salvage value of $3,000 and is... Problem 5EA: Steele Corp. purchases equipment for $25,000. Regarding the purchase, Steele recorded the following... Problem 6EA: Calico Inc. purchased a patent on a new drug. The patent cost $21,000. The patent has a life of... Problem 7EA: Alfredo Company purchased a new 3-D printer for $900,000. Although this printer is expected to last... Problem 8EA: Using the information from EA7, calculate depreciation using the straight-line method. Problem 9EA: Santa Rosa recently purchased a new boat to help ship product overseas. The following information is... Problem 10EA: Warriors Productions recently purchased a copyright. Although the copyright is expected to last a... Problem 11EA: The following intangible assets were purchased by Goldstein Corporation: A. A patent with a... Problem 12EA: Sand River Sales has a fork truck used in its warehouse operations. The truck had an original useful... Problem 1EB: New Carlisle, Incorporated, has the following assets in its trial balance: What is New Carlisles... Problem 2EB: Johnson, Incorporated had the following transactions during the year: Purchased a building for... Problem 3EB: Montello Inc. purchases a delivery truck for $25,000. The truck has a salvage value of $6,000 and is... Problem 4EB: Montello Inc. purchases a delivery truck for $25,000. The truck has a salvage value of $6,000 and is... Problem 5EB: Steele Corp. purchases equipment for $30,000. Regarding the purchase, Steele paid shipping of... Problem 6EB: Calico Inc. purchased a patent on a new drug it created. The patent cost $12,000. The patent has a... Problem 7EB: Kenzie purchased a new 3-D printer for $450,000. Although this printer is expected to last for ten... Problem 8EB: Using the information from EB7, calculate depreciation using the straight-line method. Problem 9EB: Ronson recently purchased a new boat to help ship product overseas. The following information is... Problem 10EB: Warriors Production recently purchased a copyright on its new film. Although the copyright is... Problem 11EB: The following intangible assets were purchased by Hanna Unlimited: A. A patent with a remaining... Problem 12EB: Baglias Wholesale Trinkets has a 3-D printer used in operations. The original useful life was... Problem 1PA: Selected accounts from Phipps Corporations trial balance are as follows. Prepare the assets section... Problem 2PA: Selected accounts from Han Corporations trial balance are as follows. Prepare the detailed schedule... Problem 3PA: During the current year, Alanna Co. had the following transactions pertaining to its new office... Problem 4PA: During the current year, Arkells Inc. made the following expenditures relating to plant machinery. ... Problem 5PA: Jada Company had the following transactions during the year: Purchased a machine for $500,000 using... Problem 6PA: Gimli Miners recently purchased the rights to a diamond mine. It is estimated that there are one... Problem 7PA: Tree Lovers Inc. purchased 100 acres of woodland in which the company intends to harvest the... Problem 8PA: Referring to PA7 where Kenzie Company purchased a 3-D printer for $450,000, consider how the... Problem 9PA: For each of the following unrelated situations, calculate the annual amortization expense and... Problem 10PA: Buchanan Imports purchased McLaren Corporation for $5,000,000 cash when McLaren had net assets worth... Problem 11PA: Montezuma Inc. purchases a delivery truck for $15,000. The truck has a salvage value of $3,000 and... Problem 12PA: Garcia Co. owns equipment that costs $76,800, with accumulated depreciation of $40,800. Garcia sells... Problem 13PA: Colquhoun International purchases a warehouse for $300,000. The best estimate of the salvage value... Problem 1PB: Selected accounts from Hanna Corporations trial balance are as follows. Prepare the assets section... Problem 2PB: Selected accounts from Boxwood Corporations trial balance are as follows. Prepare the detailed... Problem 3PB: During the current year, Alanna Co. had the following transactions pertaining to its new office... Problem 4PB: During the current year, Arkells Inc. made the following expenditures relating to plant machinery. ... Problem 5PB: Johnson, Incorporated, had the following transactions during the year: Purchased a building for... Problem 6PB: Underwoods Miners recently purchased the rights to a diamond mine. It is estimated that there are... Problem 7PB: Tree Lovers Inc. purchased 2,500 acres of woodland in which it intends to harvest the complete... Problem 8PB: Montello Inc. purchases a delivery truck for $25,000. The truck has a salvage value of $6,000 and is... Problem 9PB: Prepare the assets section of the balance sheet as of December 31 for Hoopers International using... Problem 10PB: For each of the following unrelated situations, calculate the annual amortization expense and... Problem 11PB: On May 1, 2015, Zoe Inc. purchased Branta Corp. for $15,000,000 in cash. They only received... Problem 12PB: Farm Fresh Agriculture Company purchased Sunny Side Egg Distribution for $400,000 cash when Sunny... Problem 13PB: Montezuma Inc. purchases a delivery truck for $20,000. The truck has a salvage value of $8,000 and... Problem 14PB: Garcia Co. owns equipment that costs $150,000, with accumulated depreciation of $65,000. Garcia... Problem 15PB: Urquhart Global purchases a building to house its administrative offices for $500,000. The best... Problem 1TP: You are an accounting student at your local university. Your brother has recently managed to save... Problem 2TP: Speedy delivery service recently hired a new accountant who discovered that the prior accountant had... Problem 3TP: Speedy Delivery has a very lazy accountant. When originally setting up the delivery trucks into the... Problem 4TP: Malone Industries has been in business for five years and has been very successful. In the past... Problem 5TP: Your family started a new manufacturing business making outdoor benches for use in parks and outdoor... Problem 8PB: Montello Inc. purchases a delivery truck for $25,000. The truck has a salvage value of $6,000 and is...
Related questions
1. What is the net present value of the “keep the old truck” alternative?
2. What is the net present value of the “purchase the new truck” alternative?
3. Should Bilboa Freightlines keep the old truck or purchase the new one?
Transcribed Image Text: EXHIBIT 78-1 Present Value of $1
Periods 4% 5% 6% 7%
7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21%
21% 22% 23%
23% 24% 25%
0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.901 0.893 0.885 0.877 0.870 0.862 0.855 0.847 0.840 0.833 0.826 0.820 0.813 0.806 0.800
0.925 0.907 0.890 0.873 0.857 0.842 0.826 0.812 0.797 0.783 0.769 0.756 0.743 0.731 0.718 0.706 0.694 0.683 0.672 0.661 0.650 0.640
0.889 0.864 0.840 0.816 0.794 0.772 0.751 0.731 0.712 0.693 0.675 0.658 0.641 0.624 0.609 0.593 0.579 0.564 0.551 0.537 0.524 0.512
0.855 0.823 0.792 0.763 0.735 0.708 0.683 0.659 0.636 0.613 0.592 0.572 0.552 0.534 0.516 0.499 0.482 0.467 0.451 0.437 0423 0.410
0.822 0.784 0.747 0.713 0.681 0.650 0.621 0.593 0.567 0.543 0.519 0.497 0.476 0.456 0.437 0.419 0.402 0.386 0.370 0.355 0.341 0.328
6
10
0.790 0.746 0.705 0.666 0.630 0.596 0.564 0.535 0.507 0.480 0.456 0.432 0.410 0.390 0.370 0.352 0.335 0.319 0.303 0.289 0.275 0.262
7 0.760 0.711 0.665 0.623 0.583 0.547 0.513 0.482 0.452 0.425 0.400 0.376 0.354 0.333 0.314 0.296 0.279 0263 0249 0235 0.222 0.210
8 0.731 0.677 0.627 0.582 0.540 0.502 0.467 0.434 0.404 0376 0.351 0.327 0.305 0.285 0266 0.249 0.233 0.218 0204 0191 0.179 0.168
9 0.703 0.645 0.592 0.544 0.500 0.460 0.424 0.391 0.361 0.333 0.308 0.284 0.263 0.243 0225 0.209 0.194 0180 0.167 0155 0.144 0.134
0.676 0.614 0.558 0.508 0.463 0.422 0.386 0.352 0.322 0.295 0.270 0247 0.227 0.208 0191 0.176 0.162 0149 0137 0126 0.116 0.107
0.650 0.585 0.527 0.475 0.429 0.388 0.350 0.317 0.287 0.261 0.237 0215 0.195 0.178 0162 0.148 0.135 0123 0112 0103 0.094 0.086
0.625 0.557 0.497 0.444 0.397 0.356 0.319 0.286 0.257 0231 0.208 0.187 0.168 0.152 0137 0124 0.112 0102 0.092 0.083 0.076 0.069
0.601 0.530 0.469 0.415 0.368 0.326 0290 0.258 0.229 0204 0.182 0163 0145 0.130 0.116 0104 0.093 0.084 0.075 0.068 0.061 0.055
0.577 0.505 0.442 0.388 0.340 0.299 0263 0232 0.205 0181 0.160 0141 0.125 0.111 0.099 0.088 0.078 0.069 0.062 0.055 0.049 0.044
0.555 0.481 0.417 0.362 0.315 0.275 0.239 0.209 0.183 0160 0.140 0123 0108 0.095 0.084 0.074 0.065 0.057 0.051 0.045 0.040 0.035
0.534 0.458 0.394 0.339 0292 0.252 0218 0.188 0163 0141 0.123 0107 0.093 0.081 0.071 0.062 0.054 0.047 0.042 0.036 0.032 0.028
0.513 0.436 0.371 0.317 0270 0.231 0198 0170 0.146 0125 0.108 0.093 0.080 0.069 0.060 0.052 0.045 0.039 0.034 0.030 0.026 0.023
0.494 0.416 0.350 0.296 0.250 0.212 0.180 0153 0.130 0111 0.095 0.081 0.069 0.059 0.051 0.044 0.038 0.032 0.028 0.024 0.021 0.018
0.475 0.396 0.331 0.277 0232 0.194 0164 0138 0.116 0.098 0.083 0.070 0.060 0.051 0.043 0.037 0.031 0.027 0.023 0.020 0.017 0.014
0.456 0.377 0.312 0.258 0.215 0.178 0149
0104 0.087 0.073 0.061 0.051 0.043 0.037 0.031 0.026 0.022 0.019 0.016 0.014 0.012
0.439 0.359 0294 0242 0199 0164 0135 0112 0.093 0.077 0.064 0.053 0044 0.037 0.031 0.026 0.022 0.018 0.015 0.013 0.011 0.009
0.422 0.342 0.278 0.226 0184 0.150 0123 0101 0.083 0.068 0.056 0.046 0.038 0.032 0.026 0.022 0.018 0.015 0.013 0.011 0.009 0.007
0.406 0.326 0262 0.211 0.170 0.138 0112 0.091 0.074 0.060 0.049 0.040 0.033 0.027 0.022 0.018 0.015 0.012 0.010 0.009 0.007 0.006
0.390 0.310 0247 0197 0.158 0.126 0102 0.082 0.066 0.053 0.043 0.035 0.028 0.023 0.019 0.015 0.013 0010 0.008 0.007 0.006 0.005
0.375 0.295 0.233 0.184 0146 0.116 0.092 0.074 0.059 0.047 0.038 0.030 0.024 0.020 0.016 0.013 0.010 0.009 0.007 0.006 0.005 0.004
0.135 0.106 0.084 0.066 0.053 0.042 0.033 0.026 0.021 0.017 0.014 0.011 0.009 0.007 0.006 0.005 0.004 0.003
0.125 0.098 0.076 0.060 0.047 0.037 0.029 0.023 0.018 0.014 0.011 0.009 0.007 0.006 0.005 0.004 0.003 0.002
0.116 0.090 0.069 0.054 0.042 0.033 0.026 0.020 0.016 0.012 0010 0.008 0.006 0.005 0.004 0.003 0.002 0.002
0.321 0243 0185 0.141 0.107 0.082 0.063 0.048 0.037 0.029 0022 0.017 0.014 0.011 0.008 0.006 0.005 0.004 0.003 0.002 0.002 0.002
0.308 0.231 0174 0.131 0.099 0.075 0.057 0.044 0.033 0.026 0.020 0.015 0.012 0.009 0.007 0.005 0.004 0.003 0.003 0.002 0.002 0.001
40 0208 0142 0.097 0.067 0.046 0.032 0.022 0.015 0.011 0.008 0.005 0.004 0.003 0.002 0.001 0.001 0.001 0.000 0.000 0.000 0.000 0.000
0124
26 0.361 0.281 0.220 0172
27 0.347 0.268 0.207 0.161
28 0333 0255 0196 0150
29
30
16
17
18
19
20
22
23
6
1
2
24
25
7
8
9
10
3
4
5
EXHIBIT 78-2 Present Value of an Annuity of $1 in Arrears;
11
12
13
12%
Periods 4% 5% 6% 7% 8% 9% 10% 11%
12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25%
1 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.901 0.893 0.885 0.877 0.870 0.862 0855 0847 0840 0.833 0.826 0.820 0.813 0806 0.800
2 1886 1859 1833 1808 1783 1759 1736 1713 1690 1668 1647 1626 1605 1585 1566 1547 1528 1509 1.492 1474 1457 1.440
3 2775 2723 2673 2624 2.577 2.531 2.487 2444 2.402 2361 2322 2283 2246 2210 2174 2140 2106 2074 2042 2011 1981 1952
4 3.630 3.546 3.465 3.387 3.312 3.240 3170 3102 3.037 2.974 2914 2855 2.798 2743 2.690 2639 2.589 2.540 2.494 2448 2404 2362
5
4.452 4.329 4212 4.100 3.993 3.890 3.791 3.696 3.605 3.517 3.433 3.352 3.274 3199 3127 3.058 2.991 2.926 2.864 2.803 2745 2689
5.242 5.076
4.917 4767 4.623 4.486 4355 4231 4.111 3.998 3.889 3.784 3.685 3.589 3.498 3.410 3.326 3.245 3.167 3.092 3.020 2.951
6.002 5.786 5.582 5.389 5.206 5.033 4.868 4712 4.564 4423 4288 4160 4.039 3.922 3.812 3706 3.605 3.508 3.416 3.327 3.242 3.161
6.733 6.463 6.210 5.971 5.747 5.535 5.335 5.146 4.968 4.799 4639 4.487 4.344 4.207 4078 3.954 3.837 3.726 3.619 3.518 3.421 3.329
7.435 7108 6.802 6.515 6.247 5.995 5.759 5.537 5.328 5.132 4946 4772 4.607 4.451 4.303 4163 4031 3.905 3.786 3673 3.566 3.463
8.111 7722 7.360 7024 6.710 6.418 6.145 5.889 5.650 5.426 5.216 5.019 4.833 4659 4494 4339 4.192 4.054 3.923 3.799 3.682 3.571
8.760 8.306 7887 7.499 7139 6.805 6.495 6.207 5.938 5.687 5.453 5.234 5.029 4.836 4656 4.486 4.327 4.177 4.035 3.902 3.776 3.656
9.385 8863 8.384 7943 7.536 7161 6.814 6.492 6.194 5.918 5.660 5.421 5.197 4988 4793 4611 4.439 4.278 4.127 3.985 3.851 3.725
9.986 9.394 8.853 8.358 7.904
7904 7487 7103 6.750 6.424 6.122 5.842 5.583 5.342 5.118 4.910 4715 4533 4.362 4203 4053 3.912 3.780
10.563 9.899 9.295 8.745 8.244 7786 7.367 6.982 6.628 6.302 6.002 5.724 5.468 5.229 5.008 4802 4.611 4432 4265 4.108 3.962 3.824
11.118 10.380 9.712 9108 8.559 8.061 7606 7191 6.811 6.462 6.142 5.847 5.575 5.324 5.092 4.876 4675 4.489 4.315 4153 4.001 3.859
11652 10.838 10.106 9447 8.851 8.313 7.824 7379 6.974 6.604 6.265 5.954 5.668 5.405 5.162 4938 4730 4.536 4.357 4.189 4.033 3.887
12.166 11.274 10.477 9763 9122 8.544 8.022 7549 7120 6.729 6.373 6.047 5.749 5.475 5.222 4.990 4775 4.576 4.391 4.219 4.059 3.910
12.659 11.690 10.828 10.059 9.372 8.756 8.201 7.702 7.250 6.840 6.467 6128 5.818 5.534 5.273 5.033 4.812 4.608 4.419 4.243 4.080 3.928
13.134 12.085 11158 10.336 9.604 8.950 8.365 7839 7366 6.938 6.550 6.198 5.877 5.584 5.316 5.070 4843 4.635 4.442 4.263 4.097 3.942
13.590 12.462 11.470 10.594 9818
9.818 9129
8.514 7963 7.469 7025 6.623 6.259 5.929 5.628 5.353 5101 4.870 4657 4.460 4.279 4.110 3.954
14.029 12.821 11.764 10.836 10.017 9.292 8.649 8.075 7.562 7102 6.687 6.312 5.973 5.665 5.384 5.127 4.891 4.675 4.476 4.292 4121 3.963
14.451 13.163 12.042 11.061 10.201 9.442 8.772 8.176 7.645 7170 6.743 6.359 6.011 5.696 5.410 5.149 4.909 4.690 4.488 4.302 4130 3.970
14.857 13.489 12.303 11.272 10.371 9.580 8.883 8.266 7718 7230 6.792 6.399 6.044 5723 5.432 5.167 4925 4703 4.499 4.311 4.137 3.976
15.247 13.799 12.550 11.469 10.529 9707 8.985 8.348 7784 7283 6.835 6.434 6.073 5.746 5.451 5.182 4.937 4713 4.507 4.318 4143 3.981
15.622 14.094 12.783 11.654 10.675 9.823 9.077 8.422 7.843 7330 6.873 6.464 6.097 5.766 5.467 5.195 4948 4721 4.514 4.323 4147 3.985
15.983 14.375 13.003 11.826 10.810 9.929 9161 8488
8.488 7.896 7372 6.906 6.491 6118 5.783 5.480 5.206 4956 4728 4520 4.328 4151 3.988
16.330 14.643 13.211 11.987 10.935 10.027 9.237 8.548 7943 7409 6.935 6.514 6136 5.798 5.492 5.215 4.964 4734 4.524 4.332 4154 3.990
16.663 14.898 13.406 12137 11.051 10.116 9.307 8.602 7984 7441 6.961 6.534 6.152 5.810 5.502 5.223 4970 4739 4.528 4.335 4157 3.992
16.984 15.141 13.591 12.278 11158 10.198
10198 9.370 8.650 8.022 7470 6.983 6.551 6166 5.820 5.510 5.229 4.975 4743 4.531 4.337 4159 3.994
17.292 15.372 13.765 12.409 11.258 10.274 9.427 8.694 8.055 7496 7.003 6.566 6.177 5.829 5.517 5.235 4.979 4746 4534 4.339 4.160 3.995
14
15
11
12
13
14
15
16
17
18
19
20
21
21
22
23
24
25
26
27
28
29
30
40 19.793 17159 15.046 13.332 11.925 10.757 9.779 8.951 8.244 7634 7105 6.642 6.233 5.871 5.548 5.258 4.997 4.760 4.544 4.347 4.166 3.999
Transcribed Image Text: Bilboa Freightlines, S.A., of Panama, has a small truck that it uses for intracity deliveries. The truck is worn out and must be either
overhauled or replaced with a new truck. The company has assembled the following information:
Purchase cost new
Remaining book value
Overhaul needed now
Annual cash operating costs
Salvage value-now
Salvage value-five years from now
New
Truck
$39,000
Present
Truck
$ 30,000
$ 17,000
$ 16,000
$ 14,000
$ 15,500
$9,000
$ 8,000 $ 10,000
If the company keeps and overhauls its present delivery truck, then the truck will be usable for five more years. If a new truck is
purchased, it will be used for five years, after which it will be traded in on another truck. The new truck would be diesel-operated,
resulting in a substantial reduction in annual operating costs, as shown above.
The company computes depreciation on a straight-line basis. All investment projects are evaluated using a 9% discount rate.
Click here to view Exhibit 7B-1 and Exhibit 7B-2, to determine the appropriate discount factor(s) using tables.
Definition Definition Calculation used to evaluate the investment and financing decisions that involve cash flows occurring over multiple periods. NPV is calculated as the difference between the present value of cash inflow and cash outflow. NPV is used for capital budgeting and investment planning as well as to compare similar investment alternatives.
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Step 1: Explain replacement analysis under capital budgeting
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Step 2: a) Determine the NPV of "keep the old truck" alternative
VIEW Step 3: b) Determine the NPV of "purchase the new truck" alternative
VIEW Step 4: c) State the replacement decision
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